Western Digital 2008 Annual Report Download - page 68

result, and monetary liability or financial impact to the Company from these legal proceedings, lawsuits and other claims
could differ materially from those projected.
After the Company announced on July 27, 2006 that it was conducting a company-initiated, voluntary review of its
historical stock option grants, the following purported shareholder derivative actions were filed challenging conduct by
certain of the Company’s current and former board members and officers in connection with various stock option grants:
(1) In re Western Digital Corporation Derivative Litigation, United States District Court for the Central District of
California (the “Federal Derivative Action”); and (2) In re State Court Western Digital Corporation Derivative Litigation,
Superior Court of the State of California for the County of Orange (the “State Derivative Action”). The complaints in
these actions asserted claims for accounting, breach of fiduciary duty and/or aiding and abetting, constructive fraud,
waste of corporate assets, unjust enrichment, rescission, breach of contract, violation of the California Corporations Code,
abuse of control, gross mismanagement, and constructive trust in connection with the Company’s option granting
practices. The complaint in the Federal Derivative Action also alleged violations of Sections 10(b), 14(a) and 20(a) of the
Securities Exchange Act. The complaints sought unspecified monetary damages and other relief against the individual
defendants and certain governance reforms affecting the Company. The Company was named solely as a nominal
defendant in each action.
The parties in these actions executed a Stipulation of Settlement on March 21, 2008. The financial impact of the
settlement was not material to the Company. The court in the Federal Derivative Action granted final approval of the
settlement on June 9, 2008, and entered a judgment dismissing the action. Based on this judgment, the parties requested
a voluntary dismissal of the State Derivative Action, which the court overseeing that action granted on July 29, 2008.
On January 22, 2007, StorMedia Texas LLC filed a complaint against the Company and several other companies,
including other disk drive manufacturers, for patent infringement in the Eastern District of Texas alleging infringement
of U.S. Patent No. 6,805,891. The Company has entered a Settlement Agreement dated August 13, 2008, on behalf of
the Company and its subsidiaries, including WD Media, Inc., the successor to the business of Komag, Inc., which
disposes of this lawsuit in its entirety. The financial impact of the settlement was not material to the Company.
On October 9, 2007, the United States International Trade Commission (“ITC”) issued a notice of investigation In
the Matter of Certain Hard Disk Drives, Components thereof, and Products Containing the Same regarding a complaint
filed on September 10, 2007 by Steven F. Reiber and Mary L. Reiber (the “Reibers”). The complaint named as
respondents the Company and several other companies, including certain other disk drive manufacturers and personal
computer vendors. The Reibers also filed a complaint in the United States District Court for the Eastern District of
California on September 10, 2007. On April 28, 2008 the Reibers dismissed the district court action without prejudice,
and on May 13, 2008 the ITC investigation was terminated.
On June 20, 2008, Convolve, Inc. (“Convolve”), filed a complaint against the Company and two other companies
for patent infringement in the Eastern District of Texas alleging infringement of U.S. Patent Nos. 6,314,473 and
4,916,635 (the “Asserted Patents”) and is seeking unspecified monetary damages and injunctive relief. One of these
patents allegedly relates to a method to reduce vibration and noise in physical systems, and the other allegedly relates to
interface technology to select between certain modes of a disk drive’s operations relating to speed and noise. The United
States Patent Office is currently reexamining the Asserted Patents in connection with a lawsuit involving Convolve and
other parties and has issued preliminary rejections of both patents. The Company intends to defend itself vigorously in
this matter.
Note 6. Business Segment, International Operations and Major Customers
Segment Information
The Company operates in one segment, the hard drive business.
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WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)